Shipper Danaos (DAC) Draws Bullish Flow into New Highs
Danaos (DAC) quietly breaking out yesterday, showing relative strength in a weak tape, and seeing 250 January $75 puts and 500 October $75 puts sell to open. DAC has seen a lot of smaller bull flow since May including buyers in the January $55 and $65 calls and sellers in the Jan. $60 puts.
DAC is a $1.61B marine shipping company with operations in Australia, Asia, Europe, and North America. They are a leader in the containership market with a diverse and high-quality fleet which gives them ample pricing power given the current supply and demand dynamic in the industry. DAC has a $1.75B backlog of charter orders through 2028 which gives them strong cash flow visibility. They also have 90% over their operating days through mid-2022 covered by longer-term contracts which allows them to manage the ebbs and flows of the market better than peers.
DAC has a wide variety of vessels from 2,100 TEU to 13,100 TEU (twenty-foot equivalent units) which means they can handle a lot of different cargo from small items up to things like automobiles. DAC has a significant fleet in the mid-sized category, an area where supply has been lower than historical levels which is driving higher rates. And, they’ve invested heavily in their digital capabilities with their WAVES data analytics platform which allows them to manage cargo more efficiently. They expect the 2H of 2021 to see a significant recovery in trade which will support demand for container vessels throughout their top markets.
Analysts have an average target for shares of $55 with a Street High $90, albeit limited coverage. Hedge fund ownership fell 7.5% in Q2. Point72 a buyer of stock.